The King's Fund today welcomed the government target to restore financial balance to the service by March 2008, but warned that the quest to achieve a £250 million budget surplus must not come at the expense of high quality care.

Speaking in response to the priorities for the next financial year unveiled today by NHS chief executive David Nicholson in the Operating Framework for 2007/08, King's Fund chief executive Niall Dickson said:

'This is a very demanding and ambitious set of performance targets given the present financial outlook. The service not only has to deal with historic debt, but also must generate a surplus of £250 million to prepare for the more uncertain financial environment that is emerging as a result of policies such as Payment by Results and patient choice.

'We have seen unprecedented levels of funding in the NHS over recent years, but there will be lower growth from 2008. It will be a significant challenge to generate savings at the same time as meeting other challenging performance targets.

'Better services are not necessarily more expensive ones but the quest to achieve financial balance must not come at the expense of patient care. There is also some danger of short-termism - we must avoid taking decisions now that deliver immediate financial savings but which damage care in the longer term.'

Niall Dickson added: 'The chances of the NHS restoring financial balance will depend largely on whether or not the service can eradicate large underlying deficits in some parts of the country. Almost one third of hospitals failed to balance their books in 2005/06 so it will be well nigh impossible for those organisations with the largest deficits to balance their books this year.

'Many NHS trusts are caught in an impossible debt trap because of Resource Accounting and Budgeting (RAB). We agree with the NHS Confederation that these accounting rules should be revised as a matter of urgency and hope that the Department of Health responds directly to the Audit Commission's review of these rules in the near future.'

Speaking on the 18 week maximum waiting time target, Niall Dickson said: 'Shorter waiting is a real benefit for patients and the government is right to focus on that - but as with the financial targets, there is always the danger that other important priorities suffer. We need to keep a constant eye on this.'

Notes to editors

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The King’s Fund is an independent charitable foundation working for better health, especially in London. We carry out research, policy analysis and development activities, working on our own, in partnerships, and through funding. We are a major resource to people working in health and social care, offering leadership development programmes; seminars and workshops; publications; information and library services; and conference and meeting facilities.